“The United States of Amazon”: From An Online Book Store to Everything Store

Introduction

Amazon.com is the biggest online retailer corporation globally which originated in Seattle, America. As a vast Internet-based enterprise, “The United States of Amazon” has the largest e-commerce market in the world which covers 180 countries (Berg & Knights, 2019). By introducing an online business model, the company has transformative influences on people’s use and understanding of the internet in economic and social aspects. Nowadays, people could shop on Amazon.com without time and location limits. Reading books on Amazon’s Kindle e-reader and listening to the audiobook through Audible app are new ways of reading in the digital era. This essay reviews the extraordinary 25-years revolution of Amazon and introduces Jeff Bezos, the founder and CEO of Amazon. Then mapping e-commerce ecology to identify Amazon’s partners and competitors in the industry. Additionally, the essay analyses transformative effects on economy and society brought by the company.

 

Amazon’s global market distribution, image: Chris Taylor, Some rights reserved.

History and Ownership of Amazon.com

Source: https://www.youtube.com/watch?v=StaMb1iwPNE (Yahoo Finance ‘The history of Amazon: How Amazon came to dominate retail’ Standard YouTube Licence)

Amazon.com was founded by Jeff Bezos, a former Wall Street executive, at the garage of his Seattle home in November 1994 (Chevalier & Goolsbee, 2003). The growth of the internet was significantly fast in the 1990s; however, browsing items from a website and getting the item delivered to home directly was still a science-fictional idea for people at that time. Jeff Bezos recognised the rapid increase of internet users and predicated that e-commence will be a potential sector of the economy in the future decades. The concept of “an online store with unlimited products” came to his mind so Bezos left the Wall Street firm and started his own business, Amazon.com (Stone, 2013). It is worth mentioning that he used “Amazon” as the name of the company because it is the longest river on the planet which echoes his dream of becoming the largest online retailer globally (Parry, 2008).

The timeline of Amazon.com’s founder and CEO – Jeff Bezos, image: Jeff Desjardins, Some right reserved.

However, it was impractical to sale “everything” online at the starting stage of the company. As a result, Bezos narrowed down a huge range of products into five main categories: compact disks, computer hardware, computer software, video and books (Berg & Knights, 2019). Finally, due to high consumer demands, a number of available titles in the market and low price point, Bezos decided to focus on selling books on his website with the tagline “earth’s biggest bookstore”. People could search on a database which contains millions of titles although only around two thousand books were stocking at Seattle’s warehouse (Ritala et al., 2014). The remaining part will be ordered as needed from wholesale sellers. Amazon employees took orders online during the day time and packed the books themselves during the night. These books then would be driven to post-office in tomorrow morning. Within the first month, the company sold books to 45 countries (Chevalier & Goolsbee, 2003).

Amazon website in 1997, image: eBaum’s World, Some right reserved.

After the success in the online book market, Amazon expanded to sell more products like toys and electronics on its website. In 15th May 1997, Amazon.com, Inc. listed on NASDAQ with a company valuation of $438 million (Weber & Jones, 2016). At the end of the year, the company served more than 1.5 million customers and yielding 838% revenue growth and extended market leadership despite aggressive competitive entry (‘1997 Amazon’s Annual report’, 1997). In 2000, the amount of sale on Amazon.com reached 1.6 billion US dollars (Linden et al., 2003). Amazon gradually transits its pure e-commerce business model to more diversified sectors like 3rd party seller services, physical stores, Amazon Web Service (AWS) and Prime subscription. In conclusion, the success of Amazon not only because of a revolutionary e-commerce business model in 1900s but also due to marketing and consumer obsession from day one.

Amazon’s share price as a financial indicator of the company’s growth, image: Google Finance, Some rights reserved.

The Industrial Ecology of Amazon.com

A number of necessary partners in financial and technology sectors help Amazon providing better services to its consumers (Welch, 2015). For example, there are payment providers like Visa, MasterCard and American Express. Users have different options to check out items on the Amazon website. The AWS Managed Services has a number of partners such as 2nd Watch, Accenture and Deloitte to meet different consumers’ need (Narula et al., 2015). To be clear, 2nd Watch is an AWS Partner Network Premier Partner providing professional and managed services to mid-large enterprises while Accenture is a company that having experiences on working with over 75 per cent Fortune Global 500. Additionally, Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most famous brands. Leveraging Deloitte’s deep industry experience and the leading-edge capabilities of AWS, they can guide you through your cloud migration process step-by-step.

Amazon has partnerships with various companies especially in AWS, image: rawpixel, No right reserved.

Although Amazon has a leading status in the market, it also has many competitors in both e-commerce and offline retail industries. Walmart is one of the biggest competitors of Amazon’s business (Chiou, 2005). Walmart is a leading brick and mortar Retail Corporation in the world. In 2018, the company operates over 11,700 stores in 28 countries and serve nearly 270 million customers a week (‘Walmart 2018 annual report’, 2018). Walmart generates $500.3 billion in total revenue in the same year . It is worth noticing that the number of consumer in the market is limited. When a person buys an item from Walmart store instead of shopping online on Amazon.com, Amazon lost the profit form the consumer, vice versa. Therefore, Amazon and Walmart have an endless battle between each other in the retail sector.

Walmart is the world-leading grocery company and the biggest competitor of Amazon, image: Patrick T. Fallon, Some rights reserved.

The tension between Amazon and Walmart increase further when two companies decided to enter the other’s market: e-commerce and brick and mortar Retail. Walmart started its online business model to beat Amazon. Walmart gains $11.5 billion in revenue from the e-commerce sector in the U.S (‘Walmart 2018 annual report’, 2018). In the Indian market, Walmart acquired the majority of Flipkart’s shares (Yue et al., 2013). It is worth mention that Flipkart is one of the e-commerce giant in India with a loyal customer base. Walmart became the strongest competitor of Amazon. On the other hand, Amazon acquired Whole Foods and directly competes with Walmart in groceries in June 2017. Therefore, Walmart and Amazon are the strongest competitors for both of them in the business.

Transformative Effects of Amazon.com

The tension between Amazon and Walmart increase further when two companies decided to enter the other’s market: e-commerce and brick and mortar Retail. Walmart started its online business model to beat Amazon. Walmart gains $11.5 billion in revenue from the e-commerce sector in the U.S (‘Walmart 2018 annual report’, 2018). In the Indian market, Walmart acquired the majority of Flipkart’s shares (Yue et al., 2013). It is worth mention that Flipkart is one of the e-commerce giant in India with a loyal customer base. Walmart became the strongest competitor of Amazon. On the other hand, Amazon acquired Whole Foods and directly competes with Walmart in groceries in June 2017. Therefore, Walmart and Amazon are the strongest competitors for both of them in the business.

Online shopping is a transformative social change in the digital world, image: Isabel Roy, Some rights reserved.

Amazon provides third-party sellers with a new approach to reach more consumers and develop business. Third-party sellers use Amazon.com as a platform to expand their e-commerce business (Chen et al., 2016). Amazon has a large group of loyal customers so many third-party sellers decide to rent a “store” in “Amazon Shopping Centre”. The company has two structures of subscriptions: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). The key difference is that FBA is handled by Amazon official while the third-party sellers take charge by themselves by choosing FBM (Zhu & Liu, 2018). FBA helps third-party sellers save time in storage, shipping and consumer services. FBA products are eligible for “Amazon Prime free Two-Day Shipping, FREE Shipping, and other benefits” (‘Amazon FBA – Fulfilment by Amazon’, 2019). A large percentage of Amazon users are Prime members and they are more likely to choose FBA products to have free Two-Day Shipping. As a result, the FBA subscription helps sellers grow business effectively and is more popular than FBM in Amazon’s business model.

Source: https://www.youtube.com/watch?v=1AVOHlpA9Mg (FulfillmentbyAmazon ‘What is FBA?’ Standard YouTube Licence)

Amazon’s Kindle e-reader and Audible app transform the way of how people read in the modern era. Kindle, an electronic reading device, launched in November 2007 by Amazon and now it becomes the most popular e-reader product in the world (Marketline, 2013). People hold an infinite library on their hands when visiting Amazon’s Kindle store online. By connecting to Wi-Fi, users could wirelessly download books, magazines and newspaper articles instantly to the devices (Rauch, 2011). Unlike a heavy physical book, Kindle is designed in a thin and light style for one-handed reading and easy-carrying. In the digital world, it provides users with a reading environment without interruptions like e-mail alerts or pushes notifications. Also, the screen of Kindle is like an actual printed page in a book so consumers will not feel tired when using it for long-time reading. Two months after Amazon launched a Kindle device for e-books, the company acquires Audible which comes with a library of 80,000 programs(DePillis & Sherman, 2019). By downloading the Audible application on a smart device, people could listen to a book any time. With the growth of mobile phone and streaming-enabled car stereo systems, Audible now holds nearly 50%  percentage of the audiobook market (DePillis & Sherman, 2019). Therefore, Kindle and Audible are two products from Amazon that change the way of reading.

Amazon’s Kindle is a transformative e-Reader product in the market, image: freestocks.org, No rights reserved

Conclusion

Amazon.com transforms how people shop, doing business and reading books today. From an online bookstore, the company become the e-commerce giant which sales everything in the world and leads the transformation in the e-commerce sector in 25 years. Although there are strong competitors like Walmart, the company still grow with great potentials. By cooperating with technology companies and third-party sellers, ” the United States of Amazon” provide life-changing effects to people’s lives in the digital age.

 

Reference List

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